Dividing Divorce Assets Could Affect Credit

Q: My daughter and son-in-law got married two years ago and bought a house. Her name is on the deed but not the mortgage. What are the consequences in case of a divorce? She gave him $35,000 for the house. Please answer.

A: If your daughter’s name is truly on the title to the home, then she’s one of the owners of the property. She may own half of the home, or a smaller or larger percentage, depending on how the ownership of the property was structured. If she and your son-in-law were married when they bought the property, it’s possible they structured the ownership as “tenancy of the entirety” or as joint tenants which means that they both own the home jointly.

The fact that your daughter isn’t listed on the mortgage documents (if that’s really the case) only means that she has no legal liability to pay back the mortgage. If your son-in-law stops paying the mortgage for whatever reason, the mortgage company would not be entitled to come after your daughter for payment. And, better yet, her credit shouldn’t be damaged by his poor financial management skills.

It’s unfortunate that only two years into the marriage, you’re asking what would happen in a divorce. However, assuming that her name is on the deed but not the mortgage, she and her husband would have to come to some financial agreement, where he would give her an amount of cash presumably equal to her down payment of $35,000 plus half of any equity appreciation in the property, minus her share of the costs of sale (if they were to sell at that point in time). In exchange — and it should only be when she gets the cash — she would execute a quit claim deed, turning over any financial interest she owns in the property at that time to him.

Likewise, in the case of a divorce, the home could end up being owned by your daughter. But looking at the bigger picture, the home would be one part of the whole picture in the event of a divorce. All the marital assets would have to be included in any divorce settlement. For that, your daughter would need to talk to a divorce attorney to determine what she would be entitled to and the different ways they might divide their assets upon divorcing.

Of course, it’s possible that your daughter’s name is on the deed and on the mortgage. If her name is on the mortgage, she’s financially responsible for making the mortgage payments along with your son-in-law. She should pull a copy of her credit history and credit score (www.annualcreditreport.com offers a free credit report from each of the three credit reporting bureaus once a year; you’ll have to pay around $7 for the credit score and you should choose Equifax) to actually see what debts are tied to her Social Security number.